) reported adjusted income of 28 cents per share in the third
quarter of fiscal 2014 (ended Jun 30, 2014), which surpassed the
Zacks Consensus Estimate of 15 cents. However, earnings declined
from 34 cents in the year-ago quarter. Adjusted net income dropped
15.2% to $28 million from $33 million in the third quarter of
On a reported basis, Meritor posted net income from continuing
operations of $236 million or $2.33 cents per share in the third
quarter of fiscal 2014 compared with a net loss of $37 million or
38 cents per share in the corresponding quarter last year.
Meritor Inc - Earnings Surprise |
Though revenues decreased 0.7% year over year to $986 million,
the figure beat the Zacks Consensus Estimate of $977 million. The
year-over-year decline can be attributed to lower commercial truck
production in South America and reduced revenues from the Family of
Medium Tactical Vehicles (FMTV) program. However, revenues
benefited from higher commercial truck production in North America.
Adjusted earnings before interest, taxes, depreciation and
amortization (EBITDA) of Meritor decreased to $80 million from $87
million in the third quarter of fiscal 2013. Meanwhile, adjusted
EBITDA margin stood at 8.1% compared with 8.8% in the year-ago
quarter. The deterioration was led by lower revenues and
unfavorable mix impact of lower sales in South America and the
Revenues from the Commercial Truck & Industrial segment fell
2.9% to $761 million in the reported quarter. Lower commercial
truck production in South America and reduced defense revenues were
responsible for the decline, partially offset by higher commercial
truck production in North America.
Segment EBITDA dropped 17.9% to $55 million from $67 million in the
year-ago quarter. EBITDA margin decreased to 7.2% from 8.5% in the
prior-year quarter due to lower revenues and unfavorable mix impact
of lower sales in South America and the defense business.
Revenues from the Aftermarket & Trailer segment increased 8.8%
to $259 million. Segment EBITDA improved 4% to $26 million from $25
million in the year-ago quarter. EBITDA margin was 10% compared
with 10.5% in the third quarter of fiscal 2013.
Meritor's cash and cash equivalents were $303 million as of Jun 30,
2014 versus $318 million as of Sep 30, 2013. Total debt amounted to
$1.09 billion as of Jun 30, 2014, compared with $1.14 billion as on
Sep 30, 2013.
In the first nine months of fiscal 2014, Meritor had cash flow of
$103 million from operating activities compared with cash outflow
of $73 million in the first nine months of fiscal 2013. Capital
expenditures were $39 million compared with $31 million in the same
period a year ago. Free cash flow stood at $64 million in the first
nine months of fiscal 2014 compared with cash outflow of $104
million in the year-ago period.
For fiscal 2014, Meritor reaffirmed its revenue expectation in the
range of $3.75 billion to $3.8 billion. Adjusted EBITDA margin is
likely to range from 7.7% to 7.9%, while adjusted earnings from
continuing operations is expected between 65 cents and 75 cents per
share, up from the previous estimate of 50 cents to 60 cents.
In addition, Meritor expects capital expenditures in the range of
$65-$75 million for the fiscal year, down from the previous
guidance of $75-$85 million. Interest expense is projected to be
Further, Meritor expects free cash flow in the band of $50-$75
million, up from the previous projection of breakeven to $25
Headquartered in Troy, MI, Meritor is a global automotive parts
manufacturer and supplier. The company operates manufacturing
facilities in North America, South America, Europe and
Meritor carries a Zacks Rank #1 (Strong Buy). Some better-ranked
stocks that are worth considering in the auto sector include
Visteon Corp. (
), Accuride Corp. (
) and American Axle & Manufacturing Holdings Inc. (
). Visteon sports a Zacks Rank #1.
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